U.S. stocks rise after more strong earnings reports

By: The Associated Press August 17, 2011Comments Off on U.S. stocks rise after more strong earnings reports

U.S. stocks resumed their rally Wednesday after a series of earnings reports came in better than expected.

Target Corp., Staples Inc. and Dell Inc. all reported earnings for last quarter that were above analysts’ forecasts. Companies in the Standard & Poor’s 500 are on track to report higher profits for a ninth straight quarter. But economic growth is weak around the world, and some economists worry that a second recession may be coming. That could pull down future results.

Target and Staples both gave profit forecasts that were above Wall Street’s expectations, but Dell cut its prediction for revenue growth this year.

The Dow Jones industrial average rose 95 points, or 0.8 percent, to 11,501 about 30 minutes after the opening of trading. The S&P 500 rose 14, or 1.2 percent, to 1,207. The Nasdaq composite rose 24, or 1 percent, to 2,548.

Stocks were up for the fourth day out of five. The market fell Tuesday on concerns about Europe’s ability to contain its debt problems.

Computer maker Dell said late Tuesday its profit rose 63 percent last quarter after businesses and government agencies bought more machines. But it also cited “a more uncertain demand environment” when it cut its forecast for annual revenue growth to a range of 1 percent to 5 percent. That’s down from an earlier growth forecast for 5 percent to 9 percent. Dell stock fell 6.4 percent Wednesday.

Other companies are more optimistic. Retailer Target said it expects to earn between $4.15 per share and $4.30 per share this year. Analysts had expected $4.14 per share, according to FactSet. Target also said its earnings last quarter rose 3.7 percent on grocery sales.

Deere also raised its forecast for full-year earnings. It now expects to earn $2.7 billion this fiscal year, up from a May forecast of $2.65 billion. The maker of tractors and other heavy equipment said its profit rose 15 percent last quarter on strong demand for farm equipment. Deere, though, fell 1.9 percent.

Crude oil rose $2.02 per barrel to $88.67. Energy stocks in the S&P 500 rose 1.5 percent, the most among the 10 industries that make up the index.

Companies are making more money, but many have done so by raising prices to offset higher costs. Higher food prices helped push inflation at the wholesale level to 0.2 percent in July, according to a government report Wednesday. But that is still well below inflation levels earlier this year when oil prices were spiking because of violence in the Middle East. In February, wholesale inflation was 1.4 percent.

Stocks have been particularly volatile in August. Worries rose as the U.S. government said it may default on its debt unless it was allowed to borrow more. The government just beat the deadline to avoid a default, but the partisanship in the debate came at a cost — Standard & Poor’s downgraded the U.S. credit rating on Aug. 5 by one notch to AA+ from the top AAA rating. That triggered one of Wall Street’s wildest weeks: The Dow rose or fell by at least 400 points in each of the first four days of last week, the first time that has happened.

Markets appear to have calmed somewhat since then. Tuesday marked the first time since the Aug. 5 downgrade that the Dow rose or fell by less than 100 points. It fell 76 points after being down as many as 190 points earlier in the day.